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A Beginner's Guide to Understanding R-Codes

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North Perth Case Study

NOVEMBER 5, 2015

The Background

Joseph contacted Vision One Projects to find out how he could develop his property in North Perth. He had a 460m2 block with a rear laneway zoned R60.

Joseph’s end goal was to create a long term property portfolio that would eventually replace his current income.

After running through his options we advised him that under the current R-codes he could either;

Subdivide and create a new strata lot off the rear laneway whilst maintaining the existing home.

Demolish the existing house and build 3 x townhouses.

Demolish the existing house and build 4-5 apartments.

We assessed Joseph’s capability of funding a project including helping him assess the tax and asset protection strategies through our network of professionals in these fields.

We teamed up with a reputable local sales agent to provide Joseph with an appraisal to determine the value of the property as is, and the demand in the area.

The Feasibility

We provided feasibilities to demonstrate all development options available and what profits would be gained over and above what Joseph could sell the block for.

Option 1) Subdivide 1 x additional lot

Subdivide rear of property and sell rear strata lot.

Maintain and renovate existing house.

Issues:

Local Authority required the existing house to maintain access from the rear laneway due to the traffic from the main street.

Re-sale market would be limited due to the awkward shape block at the rear.

Option 2) Subdivide and build at rear

Subdivide rear of property and construct a new dwelling to sell on the newly created lot rather than selling as a vacant lot.

Approx. Gross profit: $111,500 or 9% return on investment

Issues:

Same as Option 1

Option 3) 3 x Townhouses

Demolish the existing house and build 3 x townhouses for sale at completion of the project.

Issues:

The property had a 45m2 road reserve within 3.8m of the front boundary which did not comply with minimum lot size requirements for 3 x lots.

Option 4) 4-5 Apartments

Construct and sell 4-5 apartments

Approx Gross Profit: $307,000 or 17.3% return on investment

The Challenges

The property was located on a busy street in North Perth and had limitations with access which ultimately affected the subdivision options. The City of Vincent required all access to the property from the rear laneway for all options listed above.

Further to this the West Australian Planning Commission held a 3.8m road reserve to the front of the property in the event of future road widening. This meant 45m2 of land was effectively lost and could not be built on!

To fully understand exactly what we were working with we arranged a contour survey to commence the design process and determine what building envelope we would have left over.

The Solution

The findings from the contour survey had a significant impact on the development options we had originally considered. Upon reviewing the survey we decided the best options would either be to build 2 x townhouses or 4 x apartments within the available envelope.

With the help of our in-house design team, and consulting with our selling agents, we were able to create a development solution with four 2 bed, 2 bath apartments whilst still maintaining the 45m2 road reserve and rear laneway access.

We also consulted our legal team with regards to the road reserve and after consultations with the West Australian Planning Commission, believe there was a strong capacity to claim a monetary compensation for the land which would help the overall profit.

The End Result

We maintained 4 x 2bed, 2 bath apartments over two levels to keep the costs economical.

For resale value we created a secure complex with access for occupants via a garage door off the rear laneway using a fob key. For added security guests would enter through a side gate via an intercom system which only occupants could open.

The project still provides a healthy gross profit of $254,610 or 13.8% return on investment with the opportunity of this increasing to over $300,000 if the client is successful with the compensation claim on the road reserve.